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Nonresidential Construction Spending Dips In September

Nonresidential Construction Spending Dips In September 2010

While total construction spending edged up in September, private nonresidential construction slipped 1.6 percent, according to a report by the U.S. Census Bureau.

On a year-over-year basis, private nonresidential construction spending is down 24.6 percent. Meanwhile, total nonresidential construction spending – which includes both privately and publicly financed projects – was flat for the month and is down 12.4 percent from September 2009, and now stands at $559.6 billion on a seasonally adjusted annual rate.

Construction subsectors posting the largest monthly decreases were lodging, down 7.8 percent; manufacturing, 3.5 percent lower; and conservation and development-related construction, down 3.1 percent. Those subsectors suffering the biggest losses from the same time last year include lodging, down 53 percent; manufacturing, down 35.5 percent; and office construction, 24.5 percent lower.

In contrast, 9 of 16 nonresidential construction subsectors posted spending increases from the previous month led by transportation, up 4.1 percent; health care, 1.8 percent higher; office, up 1.6 percent; and amusement and recreation-related construction, up 1.6 percent. Five subsectors are up, compared to the same time last year, including conservation and development, up 25.5 percent; sewage and waste disposal, 13.9 percent higher; and water supply construction, up 7.7 percent.

Public nonresidential construction spending, which represents 55.3 percent of total nonresidential construction, was up 1.3 percent for the month and up 0.7 percent year-over-year. Residential construction spending was up 1.8 percent for the month, but is down 5.3 percent compared to September 2009. Total construction spending was up 0.5 percent in September compared to August, but down 10.4 percent compared to the same time last year.

“Though the media will likely focus upon the fact that total construction spending was up in September for the first time in three months, there is relatively little to celebrate in the most recent construction spending report,” said Associated Builders and Contractors Chief Economist Anirban Basu. “For example, total nonresidential construction spending last September totaled $639 billion on an annualized basis. In contrast, the total this September is $560 billion, a decline exceeding 12 percent. In addition, nonresidential construction volumes were virtually unchanged from August, and remained lower than they were during the early summer.

“Still, there was some positive movement. Construction spending on office space rose in September, perhaps because the lending environment is thawing a bit and new owners of buildings are seeking to re-tenant their purchases and to put their imprint on their properties,” said Basu.

“Construction related to education was also up, a good sign since the fear has been that education-related spending would continue to fall in the wake of still distressed state and local government budgets,” Basu said.

“However, there are also indications that publicly-financed spending related to the stimulus package passed in February 2009 is beginning to wane. For example, spending on construction related to water supply is no longer rising rapidly, and spending in the highway and street category declined in September. Looking at the bigger picture, today’s data suggests that overall nonresidential construction spending is poised to remain quite flat in the months ahead,” Basu said.